Strategy

Strategy
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Strategy
According to Porter (2013), a strategy is the main component of an organization’s competitive capabilities in any particular industry. A strategy is an organization’s methods or unique approaches geared towards achieving a significant competitive advantage in the market. In this case, a business strategy is the core item behind the competitive and performance capabilities of an organization. In his arguments, Porter explains that the key to understanding the actual concept of a strategy is to first and foremost distinguish it from the operational effectiveness of an organization. In this case, the strategy involves undertaking business operations in a different a manner from that of the rival competitors. As the idea of operational effectiveness concentrates on outdoing other competitors in similar activities, a strategy intends to build a distinctive approach to improve a competitive business advantage in the industry.
Porter’s five forces are a unique part of a company’s strategy development that evaluates and analyzes the competitive forces that shape any particular industry. In addition to this, these five elements identified by porter help in the development of a comprehensive corporate strategy through the proper classification and identification of the industry’s structure. In a realistic scenario, profitability is the core objective of any particular company is a specific industry. In this case, the formulation of a business strategic development policies is based on the profitability aspect.

The Porter’s five forces lay down the explanations concerning profit sustainability through corporate strategy. Thus, it becomes a part of the organization’s strategic development. The Porter’s five forces include industry competition, new entries into the market, the power of customers, the power of suppliers and threats from substitute products (Michaux, Cadiat & Probert, 2015).
First and foremost, Porter (2013) describes the industry competition as an essential aspect of evaluating business profitability and strategy formulation and development in an organization. In this force, the business strategist is capable of identifying the ability of its rival competitors and their abilities to infringe on the organization’s competitive capabilities in the industry. An elaborate strategic development requires a detailed understanding of the market and the industry structure regarding the presence of the competitors and their impact on the company’s operations. For this reason, if there exists a stiff competition in the industry, a company’s sales and profits expectations are limited. On the other hand, if the competition is minimal, the company has a significant prospect of attracting higher profits through increased sales.
In strategic development, the potential of the new entrants in the industry plays a key role in the determination of the company’s ability to compete favorably in the industry. Free entry, fewer restrictions regarding the costs of entry and minimal time restrictions limits a business power in the industry. About a company’s strategic development, it is relatively important to consider having strong barriers in an industry to limit new entrants into the industry. As such, a company that would prefer to operate in a less competitive environment, it should consider developing a strategy that is designed for an industry with strong restrictions towards new entrants in the market.
Porter (2008), describes that a company’s success and profitability is significantly affected by the power of its customers. In a situation where consumers can easily determine or manipulate the prices of goods and services in the industry, then, it’s success and profitability is highly limited. However, a relatively small and powerful customer base in the industry for a particular company signals more power and higher competitive advantage among its rivals. Rather than concentrating on expanding the customer base, a company’s strategy should concentrate on creating a powerful customer portfolio that is easily controllable through the organization pricing policy (Porter, 1996).
The power of the suppliers, inputs, components, machines, and services is yet another force that has a significant effect on the company’s profitability and strategy development. High supplier power lowers the company’s profitability, in the sense that, the suppliers can increase their prices regularly which affects the company’s profit through sales volume. The cost of switching from one supplier to another highly affects the power of a particular company in the industry. In this case, if in a certain industry there exist few supplier, then, the suppliers hold significant power over the organization which will certainly lower its profitability (Porter, 2008).
The presence of substitute products poses a high threat to a company’s profit levels significantly. As such, the substitute products influence the strategic development of any particular company. For instance, if the cost related to the substitution of the company’s product with those of other companies is relatively low, the profitability of the company is expected to be negatively affected. In this case, the formulation of a company’s strategy should be based on this force to device unique methods of mobilizing the organization’s resources to boost profitability and success in the industry.
In conclusion, it is important to note that a business strategy is completely different from a business plan. Contrary to popular belief with most of the business managers that a business plan can serve as a strategy, it is relatively reasonable to put it clear that the two concepts are different. The concept of business strategy is concerned with unique business practices that ensure a company attains a higher competitive advantage in the market whereas a business plan points out the direction and the manner in which business operations are organized in the company.
References
Michaux, S., Cadiat, A., & Probert, C. (2015). Porter’s Five Forces: Understand Competitive Forces and Stay Ahead of the Competition. [Place of publication not identified]: 50Minutes.com.
Porter, M. E. (1996). What Is Strategy? Harvard Business Review, 74(6), 61-78.
Porter, M. E. (2008). The five competitive forces that shape strategy. Harvard business review, 86(1), 25-40.
U. (2013, February 14). Retrieved January 30, 2018, from https://www.youtube.com/watch?v=KvYwKM5bY0s